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2025 (4) TMI 1568 - HC - Income TaxValidity of final assessment order without considering the petitioner s request for adjournment - validity and effect of the affidavit filed by the Income Tax Officer which contradicted the petitioner s claim regarding the adjournment request - HELD THAT - Department when confronted with the contradiction of the aforesaid affidavit with the facts on record of the case submits that the deponent of the said affidavit had insisted on filing the present affidavit stating the above facts and the remarks to that effect have also been received by her in writing. She however expresses her apology as counsel and seeks to withdraw the aforesaid affidavit. We accept the apology of Ms. Mehta however we decline the permission to withdraw the present affidavit which has been tendered before us. The same is directed to be kept on record. Let notice be issued to the deponent of the said affidavit - Shri Ashish Kumar Gupta serving as Income Tax Officer (Exemption) Ward-2 Ahmedabad to explain the circumstances which has led to filing of the present affidavit returnable on 3rd March 2025.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Breach of principles of natural justice due to denial of opportunity and ignoring adjournment request Relevant legal framework and precedents: The principles of natural justice mandate that a party must be given a fair opportunity to be heard before any adverse order is passed against it. In tax assessment proceedings under section 143(3) of the Income Tax Act, the Assessing Officer is required to provide the assessee with a show cause notice and an opportunity to respond, including the possibility of personal hearing or submission of written objections. Adjournment requests are generally considered to ensure fair hearing. Court's interpretation and reasoning: The petitioner contended that it had requested an adjournment on 02.03.2021 to submit its response by 11.03.2021, citing the need for additional time to compile material. Despite this, the Assessing Officer passed the final assessment order on 04.03.2021 without acknowledging or granting the adjournment, thereby violating the principles of natural justice. The Court found prima facie merit in the petitioner's contention and admitted the petition, staying the operation of the impugned assessment order. The Court emphasized that the petitioner's request for adjournment was communicated before the final order was passed, and the Assessing Officer's failure to consider this request raised serious concerns about denial of opportunity. Key evidence and findings: The petitioner produced documentary evidence of the adjournment request dated 02.03.2021 and the show cause notice dated 27.02.2021 which fixed the deadline for response as 03.03.2021. The petitioner's request was based on the need to gather material from multiple sources. Application of law to facts: Given the procedural requirement to hear the assessee and consider adjournment requests, passing the assessment order without considering the petitioner's request constituted a breach of natural justice principles. Treatment of competing arguments: The department contended through an affidavit that no adjournment request was made against the notice dated 27.02.2021 and that adequate opportunities had been provided through multiple notices and hearings. This affidavit, however, contradicted the petitioner's documentary evidence. Conclusions: The Court found the petitioner's claim of adjournment request credible and the department's affidavit contradictory, warranting further inquiry and staying the assessment order. Issue 2: Adequacy of opportunities provided to the petitioner during assessment proceedings Relevant legal framework and precedents: The Income Tax Act mandates that the Assessing Officer provide reasonable opportunities to the assessee to present their case during assessment proceedings, including issuance of notices under sections 142(1), 143(2), and 143(3), and fixing hearings. Court's interpretation and reasoning: The department's affidavit listed multiple notices and hearings afforded to the petitioner from 2020 through early 2021, including notices under sections 142(1) and 143(2), with several adjournments sought by the petitioner in earlier stages. The department argued that these opportunities negated any claim of denial of natural justice. Key evidence and findings: The affidavit detailed a chronological list of notices and hearings, showing that the petitioner had been given several chances to respond and appear before the Assessing Officer. However, the critical issue remained the specific show cause notice dated 27.02.2021 and the adjournment request related thereto. Application of law to facts: While the petitioner had been given multiple opportunities earlier, the failure to consider the adjournment request made in response to the final show cause notice was a procedural lapse that could not be excused by prior opportunities. Treatment of competing arguments: The department's argument on adequacy of opportunities was accepted only to the extent that prior chances were given, but the Court emphasized that each stage requires fresh consideration of requests and responses. Conclusions: The Court recognized the prior opportunities but held that the denial of the adjournment request at the final stage was a separate and significant procedural defect. Issue 3: Contradiction and withdrawal of the department's affidavit Relevant legal framework and precedents: Affidavits filed in Court are treated as statements on oath and must be truthful. Contradictory affidavits undermine the credibility of the department and the proceedings. Court's interpretation and reasoning: The affidavit filed by the Income Tax Officer stated that no adjournment was sought against the notice dated 27.02.2021, contradicting the petitioner's evidence. Upon confrontation, the department's counsel apologized and sought to withdraw the affidavit. Key evidence and findings: The Court noted the contradiction between the affidavit and the documentary evidence on record. The department's apology and request to withdraw the affidavit were recorded. Application of law to facts: The Court declined permission to withdraw the affidavit, emphasizing the need to maintain the integrity of the record and to investigate the circumstances leading to the contradictory affidavit. Treatment of competing arguments: While the department sought to rectify the error by withdrawing the affidavit, the Court prioritized accountability and ordered notice to the deponent for explanation. Conclusions: The affidavit remains on record, and the deponent is required to explain the circumstances of its filing, ensuring procedural transparency and accountability. 3. SIGNIFICANT HOLDINGS "There is serious denial of opportunity and violation of principles of natural justice" - The Court recognized that ignoring the petitioner's adjournment request and passing the assessment order without hearing constituted a breach of natural justice. "As can be seen from the above records and order sheet, no adjournment has been sought by the assessee against the notice issued on 27.02.2021" - This statement in the department's affidavit was found to be contradictory to the petitioner's documentary evidence. "We accept the apology of Ms. Mehta, however, we decline the permission to withdraw the present affidavit which has been tendered before us. The same is directed to be kept on record." - The Court established the principle that affidavits once filed cannot be casually withdrawn, especially when they contain material contradictions, and ordered inquiry into the circumstances. "Till further orders of this Court, the effect and operation of the impugned assessment order dated 04.03.2021 shall remain stayed." - The Court granted interim relief by staying the assessment order pending further proceedings. Core principles established include the inviolability of natural justice in tax proceedings, the necessity of considering adjournment requests, the importance of truthful affidavits, and the Court's power to scrutinize procedural propriety even in revenue matters. Final determinations on each issue reflect that the petitioner's claim of denial of opportunity is prima facie established, the department's contradictory affidavit is retained for further inquiry, and the assessment order is stayed to prevent prejudice pending resolution of these procedural irregularities.
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